Job hopping helped Silicon Valley thrive. Why do other states restrict it?
vox.com
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Other states don't restrict job-hopping, they just stand by and don't interfere as the free market ends up having the effect of restricting job-hopping. Employees end up signing restrictive employment contracts, and states don't prohibit them from doing so. California has made a conscious decision that the economy overall works better if some kinds of private-sector contracts are prohibited, so it's restricted what can go into an employment contract to a greater degree than other states have (every state has some restrictions, e.g. in the modern era you can't sell yourself into indentured servitude, but some states are more restrictive than others).
There's a reason why in the US, overwhelmingly contracts are read against the one who drafts them for example. There's an inherent power imbalance here. That's where laws and courts come into balance things out.
[1] To point, it's not uncommon for California-based tech companies to insert non-compete clauses into their contracts, even though they cannot possibly be enforced unless there is some special compensation.
Why is this on the employers, exactly?
"However, the awareness of a legal obligation is established, not through each party's subjective understanding of the terms, but on "objective indicators," based on what each party said and did"
Your T&C examples are adhesion contracts, subject to a different set of rules.
Here, you have an opportunity to bargain like any other party.
Of course, its usually slapped in front of them AFTER they've accepted a job. Having accepted a straightforward offer in good faith, the terms are then altered, slightly.
Perhaps it should be more clearly stated in a written offer that must be considered before accepting.
And perhaps that's why its better to not allow these. It makes it easier for employer and employees to deal with each other. And it makes companies compete more on merit, rather than manipulation.
It doesn't hurt the companies ability to compete with each other, as long as they all live under the same rules.
Of course the market runs because of rules we set in the first place.
End of the day, it's "freedom fighters" vs "insurgents".
Not enforcing some contracts is less intervention, not more.
Within the context of the U.S.'s current economic/legal system, I think it's more in accordance with common usage to think of the existence of private property and contract law as being the basic substrate on which everything else happens, including more specific government action. For example, to continue with the property analogy, we typically think of eminent domain as a state "taking" property, even in cases where a person's "ownership" of a property depends on the government in the first place (someone owns a deed to land they don't actively reside on or use, but since it's legally recognized as property, the government choosing to build something on it is legally recognized as a taking of property). But point taken that this whole contract/property system is itself created and enforced by the state, not some kind of naturally occurring phenomenon.
This may have been common usage through the 1920s, and it may be common usage for people who wish the New Deal never happened. But even then it would be a stretch. This country's legal history is a lot more nuanced than that. What you articulate is probably best described as a minority vision today.
An alternate, more radical view would be that, since the state had created contract law, property law, etc. in the first place, many New Deal laws weren't even regulations or restrictions on anything, merely the state choosing to withdraw some kinds of legal arrangements that it had previously created. But I don't think any New Deal courts were nearly that radical. They instead agreed that they were regulations or restrictions, but held that those regulations/restrictions were within the government's powers to enact, most often justifying them as within the power the Constitution gives Congress to regulate interstate commerce.
I'm not saying it wouldn't happen, I just don't remember such an ancap society existing in the first place.
By the same reasoning, if I sue you for defamation for calling me a lamebrained chucklehead, courts refuse to entertain the suit because the government won't restrict free speech. You're entitled to express your opinion, and the government won't assist me in suppressing your speech.
In many states, the government is happy to assist employers in restricting job-hopping.
I take your point that this government activity has its immediate catalyst in private actions in the free market, and that's different in important ways from other government activity. But still.
Also, in order for a contract to be enforceable, there must be an exchange of value. I would agree with the validity of a non-compete clause if there was specific compensation tied to that. For example, "we'll give you $50,000 after you leave the company if you don't compete with us for a year." But tacking it onto an employment agreement, no.
inalienable: incapable of being alienated, surrendered,
or transferred <inalienable rights> [1]
You can be denied of your life, your liberty, and/or your happiness. They cannot however be transferred to another person.
Your material possessions -- real estate, chattel property, intellectual property -- can be.
Again: the nature of inalienable rights is intrinsic, not protected by law.
You'll find that meaning supported in the definition you've provided.
(There's a whole 'nother discussion of rights-based arguments generally I won't get into, though I find the question somewhat problematic.)
Given the nature of startups and the surprisingly high turnover I've seen of people coming and going at all sorts of companies, it seems impossible to me to create a vibrant, innovative economy with strong non-competes. This is particularly true because the most powerful non-competes are signed by the most senior management, so those with the most experience and best view of a sector are the least able to start something new after leaving their previous gig.
It just shows how much it affects our thinking both as entrepreneurs and employees.
"... (1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or ..."
If you work for a large company in the valley, how does it affect you?I'm curious if anyone has first hand experience with it.
Large employers will generally own whatever you do in your spare time. They will not mention this, and generally not care, but if you make a ton of money or do something really popular, they will start a fight.
Note: "The employee bears the burden of establishing his invention comes within Labor Code section 2870. (Lab. Code, § 2872.) "
See also cubic corp v. marty, which disassembles most typical arguments:
"Marty argues under the Labor Code provision "the employer is not entitled to the invention unless it 'resulted from' work performed by the employee, even if the invention, in general, relates to the 'business of the employer'...."" Marty has misconstrued the Labor Code provision. <court proceeds to trash Marty's arguments> etc
I have yet to see a case where an inventor wins.
> In mid-May 1977, Marty came up with an idea for an electronic warfare simulator (EWS), a device for training pilots in electronic warfare. He developed a block diagram in May 1977 and in June 1977 a manuscript describing his invention. He showed both the diagram and manuscript to Minton Kronkhite of Cubic, representing it might be a new product which Cubic could add to its product for training pilots, the ACMR (air combat maneuvering range). fn. 1 Cubic had had plans to add electronic warfare training to its ACMR but had not yet developed it at the time of Marty's invention. Kronkhite thought Marty's invention was a good idea and passed along the manuscript to Hubert Kohnen, another Cubic employee involved with the ACMR.
The guy gets a significant raise and Cubic works with the Navy on a program to study the idea, with the idea that Marty would be program manager.
The guy goes on to get a patent on the idea on his own without telling anyone. Approaches Cubic offering to sell the rights. Cubic demands the patent and fires him and she's for ownership. He tries to defend himself by saying that his job responsibility is not to invent:
> Further, Marty presented his invention to Cubic as a new product for Cubic, something which could be added to their ACMR. Marty was made program manager on the government contract to study (and refine the design of) his invention. While Marty may not have been a "design" engineer at Cubic, the scope of his employment did not preclude design work and in fact, Marty perceived it as encompassing design work since he presented his invention to Cubic as a design for Cubic without expressing any reservations of rights or indications that the invention was not a part of his Cubic employment
Sounds like the guy did some sketchy shit and was called on it. This is nothing like the scenarios we are talking about where an employee invents something on their own time with no connection to their company or their work. The court tore up his argument because the basis for the argument was that he was a non-inventing employee and somehow the agreement he signed didn't apply.
It's the leading case and, as i said, quoted to this day in pretty much every other case.
Please ignore the facts of this case, what matters here is the courts view on what it means to be related to the business, who bears the burden of proof, etc.
"This is nothing like the scenarios we are talking about where an employee invents something on their own time with no connection to their company or their work. "
Define "no connection". In the hundreds of times i've had employees claim this, i can count on one hand the nubmer of times they were right factually (IE they often don't know enough about a large company to know everything that is going on, etc), and can think of only one case i think a court might agree with them.
Again, feel free to find a case that supports the general view that stuff you do on your own time is yours, and employers are going to have to fight to get it.
Because Cubic says the opposite - the burden is on you to prove it is something that isn't owned by your employer.
> Because Cubic says the opposite
The guy showed his thing to his employer and they started pursuing it. How could it not be clearer the employer owned it?
I'm trying to understand how you can claim this shows Cubic shows anything other than if you give your ideas to your employer they become the employer's. That's pretty normal. Every day as an employee I have ideas I put into the products I create. Those ideas I get paid a salary for. I might have had those ideas while showering. They still go into my work and become the employer's.
Outside projects can have conflicts but Cubic is not related to that case.
As for companies owning everything, first off you might want to look up "duty of loyalty". Just because you thought of a solution at lunch (off hours) doesn't mean that therefore it doesn't belong to your employer. At the same time, in California at least, the has to be related to their work. Of course courts decide what's related and what's not and there's a broad spectrum. Selling coffee at night while building websites at a job seems pretty black and white. Making a mobile game at home while working on a console game at work is clearly in some kind of gray area. Back to "duty of loyalty" you have a duty not to compete with your employer. Putting out another game is arguably competing.
The right thing to do as pointed out by others is it to get a signed letter from your employer. Google offers these. So does Microsoft. I'm sure other companies do as well. If your's doesn't consider that a reason to look for a better employer.
I am simply pointing out that Cubic v Marty does not in any way disprove that idea that "what you do on your own time is you own" either, because that's not what happened in that case. Instead, the employee had an idea directly relevant to their employer's business, showed it to them, got a raise, pursued it as an actual work project, and then after all that went off to patent it privately. That is not really a situation that has to do with someone inventing something on their own in their private time having nothing to do with work, where the question is whether the employer should own it.
The decision in Cubic v Marty should not be surprising or remarkable from what I have read. As an employee, you obviously cannot take home technology ideas that you were pursuing at work, as an official work project, and expect to patent them and get away with it. If you think there is something specifically interesting and relevant about it, then please point that out since I'm not sure what I'm missing. I am not saying that I have a more relevant case, just that I don't follow the relevance of that one.
If you are a salaried employee, and you use company resources on the project, or review it with other employees, or the project is in your employer's field of business, or if you pursue the project as an official work project, and it's in the line of work you do for your employer, and if you have signed an agreement agreeing to do so, and these are all signs that the employer owns the result. The case where none of those things are true is the case that I think will be interesting.
I guess the cases that wind up in litigation tend to be the ones that aren't clear-cut, and I can believe the employer usually wins those. That doesn't mean that section 2870 makes no difference. If you can show me a case where the requirements were pretty clearly met, and the court still ruled against the inventor, that will be more convincing.
You will have the same trouble. Cubic is quoted to this day for all the propositions i pointed out.
As for "show me a case", i'll ask the opposite: Find me a case that supports any view of this provision that people like to have (IE that most stuff they do in their spare time is going to be owned by them).
(to help: I'm not aware of any such cases, and i skimmed the headnotes for all 109 cases that cite Cubic)
Well, yes. As you quoted, the statue itself directs the court to do that.
> They also took a very broad view of what it means to be related to the business.
Okay, I've now read the whole opinion and nothing in it surprises me.
If your point is that people tend to read secs. 2870-2 less carefully than they should, I am in no position to dispute that. I certainly agree that someone hoping to avail themselves of sec. 2870 would be well advised to be extremely careful -- even as to their choice of employer.
But I think there must be employers that don't make a habit of suing former employees when it appears that there's a reasonable chance that the 2870 requirements have been more-or-less met. Lots of Google engineers leave to start startups, I have heard, and I'm sure in plenty of those cases, they had their idea while they were still Google employees. If Google started litigating such cases regularly, they would destroy their reputation as a great place to work, I would think. (I have never worked for Google, so this is just my guess.)
Basically: Engineers tend to think it matters what they do for the company, but 2870 instead says it matters what the company does, not what you do for the company.
Employers can claim stuff that "(1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or"
For large tech companies, this pretty much covers everything you might want to do.
The key is full disclosure, in advance.
And I never had any trouble over it.
Additionally, I've found that at the point of employment projects don't need to be more than an idea; as long as you get them included with the contract, a simple abstract of what is covered is enough to give you something to play with whilst employed by said company.
Oh, and make sure to include projects even if you don't deem them to conflict with the company's area of core business. IME they'll be met with a chuckle and a 'not sure why these are here', but when the company is subsequently working out how to jump on the latest buzz bandwagon your side project may suddenly fall under some random wing of interest. Far easier to get it in there early.
The lawyer we consulted said it was the most draconian thing he'd ever seen and that we should all quit on the spot.
> After Almeida switched jobs, a lawyer from his old employer, ServiceMaster, sent him a letter threatening a lawsuit
> The company told the Seattle Times that the noncompete agreement was necessary because ServiceMaster had provided Almeida with valuable training
So require that the employee stay with the company until they recoup the investment. If the employee leaves before the term is up, charge the employee the cost of training.
Get the employee to shadow another employee for two weeks, then claim they were trained for ten days at $1000/day.
The only good thing I can say about that era was that Google had their ass handed to them by Facebook, which was one of the few non-participants in the collusion. Google employees had few options but to go to Facebook in droves.
Proposition 13 has nothing to do with tech employment directly. It was created because politicians just couldn't help themselves from raising real estate taxes voluntarily.
I also must credit Facebook for breaking the deal -- one of the few times I can support the company's stance.
Alas, as nice as it is to cloth an issue we care about in the language of moral superiority, banning noncompete agreements does in fact impact the freedom of contract. (In the same way, but to a lesser extent, than the ban on being able to sell yourself into slavery.)
Pragmatically this is the right thing to do. But there's no Freedom argument for it.
In fact, freedom from economic coercion due to highly asymmetric power relationships rates quite a bit higher than some silly "freedom of contract" which is way the hell down the list after freedom of personal safety, etc.
Not allowing consensual slavery agreements, consensual beating people to death, etc, also limits "freedom of contract".
That's because we value other things more.
There's nothing sacred about "freedom of contract".
And in most pragmatic cases when an enterprise makes a contract with an employee, there's not much freedom for the side of the employee either.
People always think of star programmers etc who are courted to go to work somewhere and have tons of choices, which are a tiny minority, instead of thinking of the hundreds of millions who need a job to pay the bills, healthcare, etc.
Even when a sector (like IT) does well compared to others, let's see how it goes if there's a bubble bust.
Which kind of brings up an interesting angle - if every company is asking for an NCA, can't you argue that you signed it under duress, i.e. you didn't have a choice in the matter, and therefore that part of the contract is invalid?
It might seem contradictory but the world is not always nice and tidy.
Consensual here just means "the other person agreed/signed to it".
But what forces pressured them to do so are seldom examined -- and lots of people assume as long as it's not a "gun to the head" it's OK.
Of course from:
a) "total freedom to evaluate and pick among many options -- or even ignore them completely" to
b) "tons of factors pressuring enormously for a quick decision, and very limited options"
there's a huge scale of "consent" before we get to "gun to the head" non-consent -- but it's seldom acknowledged. In other words, consent is seldom black and white.
If we want to make the term less ridiculous, consent should only be used when there's actual and considerable choice on the matter. Not when it's "that or immediate hunger/homelessness/etc."
Of course long term everybody could be homeless/hungry without a job, but there's a difference between a person choosing to work for company X after evaluating what they do, the salary, etc, and a person in some Asian town that has to go work to the nearby factory or else, or a non-college educated single mom in Alabama a week away from eviction, that latch-on to whatever they can get to survive.
It actually used to be common in the Roman empire. It was effectively how you declared bankruptcy.
This is something to bear in mind any time anybody advocates strengthening creditors' rights (e.g. removing bankruptcy protections or making them more onerous). The logical end point of this process is actual, literal slavery.
Strengthening creditors rights against companies can be done without strengthening them against people.
When enforcing those contracts through coercion, the state denies the infringing party some freedom.
When you are worried you won't be able to pay the rent you are not likely to care much about non-competes and you will get yourself into a bad situation.
To use your extreme example, people that did give themselves into slavery (and yes this used to happen during roman times), usually did it because of hunger and desparation. And because living in a country that has widespread slavery it was impossible to get paid for most labor. Certainly they would have preferred if Rome had banned slavery and even had a minimum wage. Then they would be able to do similar work but be paid for it. I doubt they would have worried much that banning slavery limited their freedom to contract. In fact they would practically have much more freedom in a world that banned slavery, as they would be ordinary employees that would be free to do as they wished in their free time.
Well thought out worker protection laws do improve freedom for ordinary workers despite the technical reduction to the freedom to contract. The "freedom to contract" argument tends to get peddled by people and entities that have all the bargaining power.
After all, wouldn't the university operate more efficiently with underpaid adjuncts?
That's absolutely not to say that contract enforcement isn't useful or desirable, but it clearly must be limited. If contract enforcement is unlimited then some people will end up singing contracts that put themselves into literal slavery and we prohibit that for a reason.
Noncompetes should be allowed only if the company offers to pay a minimum of market-rate salary for the duration (either what they were paying you or the best offer you've received, whichever is higher, to keep up with changes in market rates after you leave). That would then at least make it a valid contract.
But no company would want to do that, because then they'd have to pay everyone who quit or got fired for years afterward. And since the legal system is mostly controlled by corporations, that's unlikely.
What is the corrective mechanism, the courts?
Read the article I linked above and the study it references. That is empirically false.
Without some argument that this issue is governed by a particular special circumstance, your comment has no substance.
I think it's kind of funny that politicans are not interested in their own country.
An absolute monarch might be interested in his country, because it's actually his property.
My gut says that most of the time, they'll back down and take that off the table. But I guess it depends on whether you have a huge legal team backing you up...
Personally, I'm not in the habit of signing my rights away in return for a paycheck. I'll look around for another job, thankyouverymuch.
That's the evil of these sorts of unconscionable contracts. As a potential employee, it's easy to be in a predicament that would force you to suck it up and accept ridiculous terms of employment.
The 6-12 month gap that's created when I can't participate in a new employers retirement or healthcare plan. These benefits should start immediately.
Losing accrued vacation time also sucks.
Is it a matter of intimidation?
If you've signed a non-compete and jump ship, you can simply NOT tell your old employer that you got a new job.
What are they going to do? Sue you for working at a company they don't know about? There is nothing they can do if you are subtle.
You also have to avoid:
1) Telling your old co-workers
2) Mentioning or updating anything on social media. Even if you're not "friends" with old co-workers on e.g. Facebook, that information could still be leaked.
3) Giving any sort of talk where your employment might be leaked
4) Being at an industry event where your employment might be leaked
5) Being named on the company site, and thus your name showing up on a simple google search.
If your old employer is vindictive (which could be one reason you left), there are lots and lots of ways for them to find out where their former employee went to.
Being subtle will probably only keep your employment status hidden with the sorts of employers who aren't really making broad non-compete clauses to begin with (i.e. employers who don't care).
It doesn't matter about any of those, if just as a policy, whenever anyone at all asks where you work, you don't tell them.
Or you just talk in broad strokes/industry without specifically mentioning the name, and if your old employer "finds out" that you have another job, they still can't do anything because they don't know the specific employer.
That's a pretty mentally taxing adjustment for most people to make.
It's also incredibly awkward when engaging in small talk with new people. Being evasive about answering where you work will lead to many presumptions (e.g. that you work for a 3 letter agency), few of which are very conducive to continuing a conversation.
Similarly I could just lie about where I work, but I think you can probably see how that's similarly taxing to do continuously.
"I'm a web developer, I work at a small startup! I do X, Y, and Z"
Not that hard... especially since no one has ever heard of whatever small company you work at anyway.... It's really not weird.
Your discretion and/or fearlessness of lawsuits won't matter. The new employer isn't willing to risk it.
In situations like this, I put it on my long-term to-do list to get it off my mind. In a remarkable number of cases, I get to cross it off my list months later without having had any arguments.
I don't know enough about law (and neither do I know your jurisdiction), to say whether that implicit contract would include the non-compete they obviously wanted you to sign.
It was the internet. Sun among others were pushing open standards, TCP/IP, and the internet while DEC tried to go proprietary with DECNet. It might not have paid off for Sun in the long term, but the industry in Bay Area was definitely pointed in the right direction.